Following the recent acquisitions by eBay and CBS of StumbleUpon and last.fm, respectively I realised that the amount of Web 2.0 start-ups which have sprung up over the last 3 years amazes me; only a very small amount of these succeed, and even these are now rarely independent.
eBay acquires Skype
Amazingly, eBay acquired Skype for $2,600,000,000 (according to the BBC), which could potentially rise to $4,000,000,000 if certain goals are met.
This particular acquisition was made in September 2005 and is probably one of eBay Inc.’s most important purchases since it gained control of online payment processor PayPal in 2002.
eBay’s purchase of PayPal was a sound business decision, but I’m not so sure about Skype. Whilst PayPal was already heavily integrated into eBay at the time of purchase, Skype was rarely used. As a matter of fact, I would call eBay’s attempts of integrating Skype into their site a failure.
Price: At least US$2,600,000,000, which is more than 5 times the GDP of the Caribbean island of Grenada! - Date: September 2005
YouTube bought by Google
YouTube is the biggest online video site. From when the domain youtube.com was registered in February 2005 to when the site was launched in August of the same year the site must have gained some status; an investment of US$3,500,000 was made by prestigious VC firm Sequoia Capital in November 2005.
Google bought YouTube by offering them $1,650,000,000 (yes, $1.65 billion) in Google stock. Ironically, the VC firm which funded YouTube also funded Google!
Price: US$1,650,000,000 - Date: October/November 2006
MySpace bought by News Corp
MySpace is probably the biggest Web 2.0 start-up to be purchased. Currently, MySpace is part of Murdoch’s News Corp (along with Fox and my TV provider BSkyB!). Prior to being owned by News Corp, it was owned by Intermix Media. Indeed News Corp didn’t buy MySpace as such, but instead bought Intermix which owned MySpace. News Corp paid US$580,000,000 for all Intermix sites in July 2005.
Price: US$580,000,000 - Date: July 2005
CBS buys last.fm
Only last week was it announced that US TV giant CBS was acquiring British-based musical social networking site last.fm for $280,000,000.
This deeply upset me. Why? I’m a big fan of last.fm, as it is by far the most successful British start-up (yes, it is British and not from the Federated States of Micronesia as its domain name would suggest!), and I don’t want a traditional media mogul to take control of it. In all fairness to CBS, they do produce some high quality programming (from Star Trek TNG to JAG!).
Still, the idea of one of the most innovative things to come out of my country online in the past few years getting purchased by a bunch of Americans upsets me!
To be frank, though, I think if I owned last.fm, I would have to accept that offer!
Our glorious and honourable mainstream press have also picked up on this story, commenting how the original creators will each receive about £20,000,000!
Price: US$280,000,000 (GB£142,000,000) - Date: May 2007
Flickr bought by Yahoo!
Photo sharing site Flickr was bought by Yahoo! prior to del.icio.us. Sadly, Flickr didn’t ’survive’ this purchase, like del.icio.us did, and has integrated lots with Yahoo!, despite the wishes of its users.
Yahoo! purchased Flickr in March 2006, but much like the del.icio.us purchase the amount wasn’t disclosed (and I can’t even find any speculation regarding the sum).
Last November, MacManus speculated Yahoo! would either kill off Photos or Flickr. He seemed to think Flickr was the more probable option, but as it turns out Yahoo! killed Photos. Strange.
Price: Unknown - Date: March 2005
eBay stumbles upon StumbleUpon
eBay, like CBS, has also acquired a high profile start-up last month: StumbleUpon.
For those of you who don’t know, StumbleUpon is a social website discovery engine. Basically, based on your ratings of websites it suggests other sites you may enjoy.
eBay’s purchase of StumbleUpon doesn’t compare to their acquisition of Skype as they only paid $75,000,000! StumbleUpon has a userbase of 2,300,000 users, so it’s understandable how eBay would like to be able to control these. If you think about it, eBay has paid about $32 per user (which does seem a lot!).
Price: US$75,000,000 - Date: May 2007
del.icio.us bought by Yahoo!
Bookmark manager del.icio.us was acquired by Yahoo! for an undisclosed amount, rumoured to be in the region of $15,000,000 and $20,000,000. Whilst this doesn’t compare to the amounts offered above, del.icio.us has a much more specific clientele (yes, us nerds!).
I am impressed how unlike Flickr, del.icio.us seems to have retained its independence from Yahoo! for the end-user. del.icio.us doesn’t force its users to utilise a Yahoo! log-in in order to authenticate themselves. Still, the comment thread which initially followed del.icio.us’ announcement in December 2005 is full of mixed reactions.
Price: Unknown: CNN reported it was likely to be between US$15,000,000 and US$20,000,000 - Date: December 2005
Yahoo! acquires MyBlogLog
I’m a big fan of MyBlogLog. Indeed I reviewed MyBlogLog Communities when it was first released about this time last year.
Yahoo! bought MyBlogLog in January 2007 for $10,000,000 which is extremely reasonable considering that it had such a small target audience (social bloggers!).
Price: US$10,000,000 - Date: January 2007
In this article, I’ve only covered high-profile purchases. I haven’t even gone into smaller ones like Google’s purchase of JotSpot or Writely.
It’s most interesting how Web 1.0 sites like Yahoo!, eBay (and even Google to a degree) and traditional media companies seem to be killing off most Web 2.0 ventures by simply gobbling them up.
The sad truth is that such companies have saved up large amounts of money and wish to kill off the new wave of start-ups by buying them out. In a way now, when a start-up starts it’s aim isn’t a sustainable model for earning profit but rather a model which will attract other firms to take them over.
Web 1.0 and traditional media firms are buying up Web 2.0 firms so fast. What’s the result? Rebranding, tasteless redesign, loss of identity and through it the loss of the New Web.
Of course, Web 1.0 companies only buy the site which dominates a market; I don’t see Google trying to buy Zooomr. By buying a small start-up, you have a less loyal userbase and must fight for a place in a market. When Yahoo! bought Flickr, it realised most users would bother to switch regardless of their actions.
The way in which one site dominates a specific market kills off its competition. Whilst markets like time management are still very much alive, there really isn’t a site which competes with YouTube or Skype at an equally high level.
The traditional media and the first wave of Internet start-ups are scared. Unfortunately, instead of hiring innovators they simply decide to buy innovator’s websites!
Graphics designed by Azhar Chougle of commadotcolon
Tags: web 2.0, web2, web 2, web2.0, business, google, yahoo, ebay, cbs, last.fm, del.icio.us, flickr, youtube, mybloglog, skype
I think most of web 2.0type sites will ultimately have to come up with a business model rather than another cool way to do something else that has already been done to death or face either an acquisition or buyout, or worse take the ebay exit.
The popular ones got their big payday, but from the dozens that are launched in any given week hardly a few ever make an impact.
There is just too much innovation and not enough consumers I feel.
How have these companies killed off these sites? In some cases being bought by larger companies has only, or at least will only, improve these sites/services.
Dan: They lose their status as an independent start-up. Indeed, Yahoo! has messed up Flickr IMHO, too!
Well there is one more which isn’t mentioned here..Google bought FeedBurner , now google also has stats on hundreds of blogs and their traffic trends, i totally agree with your views…i sure hope Web 3.0 doesn’t fall for the the money
Still amazing to see how in so few years ‘cyberspace’ has grown so big, and equally are the amounts of $$ that is attracts.
Though a lot of people (like yourself) are probably used to is by now, I’m still a bit dumbfound by the concept.
Thanks for sharing that though - it was very interesting
Joe: Surely they now have much greater status as they’ve been bought by companies that already have great status…